It's an unusual case, even by criminal world standards. Coin fraudster Joseph Romano was behind bars on Long Island, N.Y., when he wanted to exact revenge against those who had put him in prison for committing fraud that targeted seniors, according to prosecutors

"Romano was vehemently angry at the judge, the prosecutor and anything to do with his present predicament," said William Hochul Jr., the U.S. attorney for the Western District of New York.

The coin fraud case began more than a decade ago in 2001, when Romano, now 51, set up an operation selling collectible coins from Long Island. Romano's team claimed the coins were of a higher-quality grade than they actually were.

Source: U.S. Attorney

In this undercover video still Dejvid Mirkovic, left, hands over money to an undercover agent posing as a hit man.

In some cases, they falsely pitched the coins as more valuable if purchased as sets to unsuspecting elderly victims, according to prosecutors. During an eight-year span, Romano's coin business raked in $40 million from more than 1,500 people. The money helped support a lavish lifestyle that included multiple homes and vintage cars.

"I got a phone call telling me that they knew I was interested in a particular type of coin, the Franklin half dollars, and that they had some good deals," said one victim, who spoke to CNBC on condition of anonymity.

The victim purchased a roll of coins, but quickly found himself subsequently bombarded by high-pressure pitches. They were "constantly badgering me and telling all these great stories and not being able to fulfill," the victim said.

And to close the deal on these fraudulent sales pitches, Romano's team claimed that if the victim bought a set of coins, an investor the team knew of would purchase them for a profit, according to prosecutors.

But the promised investor never materialized, and the victim told CNBC that he was duped into spending his life savings and even selling his antique car to buy more coins. "I was trying to give them one more benefit of the doubt hoping it would turn around," he said. "For me, it never did."

Source: U.S. Attorney

Joseph Romano

Romano, originally from Levittown, N.Y., is currently at the Metropolitan Detention Center Brooklyn awaiting an April sentencing in connection with his conviction on two counts of conspiring to murder government employees—a federal judge and an assistant U.S. attorney. Those two federal officials previously had prosecuted Romano for leading the coin fraud operation.

Romano pled guilty to conspiracy to commit mail and wire fraud in connection with his operation of a coin boiler room and is serving a 15-year sentence. He also was forced to pay $7 million in restitution. The additional April sentencing would only add to his jail time.

(Read more: Conn. man sentenced for fraud of church, investors)

Romano's lawyer, Michael Bachrach, said in a statement emailed to CNBC: "We argued at trial that Joseph Romano was entrapped. There is no question we proved he was set up by an informant working for the government." Bachrach added he will appeal the charges that Romano targeted federal officials.

Why the coin scam business is a growing problem

According to an Investor Alert issued by New York's attorney general, there are up to 20 million investors in coins. And fraudulent coin dealers are a growing problem.

Doug Davis, the founder of the Numismatic Crime Information Center, which tracks coin crime, told CNBC that with volatility in the metals market, he's been seeing a rise in coin fraud during the past three years.

In fact, according to the New York attorney general, many unscrupulous brokers—who are barred from selling stocks and bonds—turn to selling coins. One specific form of fraud is dealers placing a higher, false grade on coins to command high prices.

Romano was part of this coin fraud underworld, and hisfraud scheme finally came crashing down in 2008, when he was arrested and charged with conspiracy to commit mail and wire fraud related to falsified coin values. He was released in November of that same year on bail, with the condition that he avoid telemarketing.

And while out on bail, Romano followed a unique path of trying to actually recreate his fraudulent coin empire, prosecutors say.

Romano: Livin' large behind bars

Romano set up another coin business in Florida with neighbor Dejvid Mirkovic, according to prosecutors. "They told me don't get involved with telemarketing. I went out right? ... I went out on bail. I built another company. In one year I made $1.3 million," Romano bragged to a fellow federal inmate. That's according to one of several secret video recordings from prison that CNBC has obtained.

Romano eventually was caught for running the fresh coin operation, and prosecutors revoked his initial 2008 bail.

But even with Romano back behind bars, his neighbor and partner Mirkovic kept the coin business running, sending money to help Romano live large behind bars. "I pay someone to do my laundry. I get three different commissaries," Romano said in a recorded phone call with Mirkovic that CNBC has obtained.

In the end, prosecutors say what they may remember most about the coin fraudster—also a husband and father—is his desire to got after federal officials, who had prosecuted him.

Said Romano to a fellow inmate, "I'd love to kill them both," according to recordings CNBC obtained. The federal inmate eventually tipped off authorities.

And Romano, in fact, had a long list of individuals he wanted to retaliate against—everyone from former attorneys to a mechanic, who allegedly had done him wrong, prosecutors said.

After investigators staged an assault on a mechanic at Romano's request, in connection with a sting operation, Romano confessed his happiness to business partner Mirkovic, according to recorded conversations. Said Romano, "I'm in my cell ... I'm [expletive] dancing around and singing."